GBP/USD – Pound Higher as British CPI Surprises Markets

The British pound has posted gains in the Tuesday session. In North American trade, GBP/USD is trading at 1.3892, up 0.39% on the day. On the release front, British CPI was unchanged at 3.0%, edging above the forecast of 2.9%. There are no major events out of the US. On Wednesday, the US releases inflation and retail sales data. Traders should be prepared for some movement from the pair during the North American session.

There were no surprises from British inflation numbers on Tuesday. CPI, the primary gauge of consumer spending, was unchanged at 3.0% in January. CPI has hovered around the 3% level since August, well above the BoE target of 2.0%. Wage growth has not kept up with the brisk clip of inflation, putting a further squeeze on the British consumer. This could dampen consumer spending, a key driver of the economy. High inflation is putting pressure on the Bank of England to raise interest rates, and last week the Bank said that it was considering faster and larger rate increases than it had projected back in November. Many analysts have circled May as the date of the next rate increase.

A key factor in last week’s market turbulence was investor concern over more rate hikes due to inflation. Given this concern, it’s likely that the US CPI and Core CPI releases on Wednesday will be a market-mover. The markets will be glued to the inflation indicators, and if inflation numbers are higher than expected, we could see some volatility from the US dollar as well as the stock markets.

GBP/USD Fundamentals

Tuesday (February 13)

• 4:30 British CPI. Estimate 2.9%. Actual 3.0%
• 4:30 British PPI Input. Estimate 0.7%. Actual 0.7%
• 4:30 British RPI. Estimate 4.1%. Actual 4.0%
• 4:30 British Core CPI. Estimate 2.6%. Actual 2.7%
• 4:30 British HPI. Estimate 4.9%. Actual 5.2%
• 4:30 British PPI Output. Estimate 0.2%. Actual 0.1%
• 6:00 US NFIB Small Business Index. Estimate 106.2. Actual 106.9
• 8:00 US FOMC Member Loretta Mester Speaks

Wednesday (February 14)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.5%

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, February 13, 2018

GBP/USD February 13 at 12:00 EDT

Open: 1.3837 High: 1.3924 Low: 1.3833 Close: 1.3892

GBP/USD Technical

GBP/USD posted small gains in the Asian and European sessions. The pair continues to move higher in North American trade

• 1.3809 is providing support
• 1.3901 was tested earlier in resistance. It is a weak line and could break in the North American session

Current range: 1.3809 to 1.3901

Further levels in both directions:

• Below: 1.3809, 1.3744, 1.3613
• Above: 1.3901, 1.4010, 1.4128 and 1.4271

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Tuesday session. Currently, short positions have a majority (55%), indicative of trader bias towards GBP/USD reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.